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  • Christian Armbruester

Darling Buds of May, Revisited, Again

Why September is a month to remember.

Thankfully, we didn’t sell in May and go away. Global equities are up another 7% since then and more than 15% on the year, so happy days. As we approach October, or rather the month when most crashes happen, people are starting to get nervous. Looking at the derivatives markets we know that tail risk protection is trading at a premium, and rightfully so. Remember, we would all like to buy a bit of insurance, but someone has to sell it to us and there aren’t many takers when it comes to dishing out get-out-of-jail-free-cards.

The point is it remains difficult to take a view on the equity markets. For those of us that are old enough to remember, 1500 on the S&P 500 used to be an almost magical boundary upon which we stumbled badly, twice. First in 2001, and then in 2008. To be sitting now just shy of 4500 and having gone through one of the largest economic and market crashes in history seems extraordinary. Particularly, as we are still not quite through the pandemic.

So much for the charts, but we can also not garner any help from the study of macroeconomics. I don’t think anyone truly understands the ultimate consequences of quantitative easing and what has happened since is clearly beyond any textbooks that have ever been written. Far from being all doom and gloom however, we must also consider that we could very well be in a new paradigm. I know that may sound like the oldest joke in the book, but please can anyone remember a time when anything was normal?

What we know is this, we can rely on technology even in our darkest hour and a Zoom call can do when you just don’t feel like flying to Zurich for that one meeting. It also seems highly unlikely that the central banks are going to put a stop on things any time soon. All one needs to do is look at Japan, who have been at this for the better part of four decades. Too big to fail takes on a whole new meaning when everyone is long and highly dependent on cheap available credit to keep the lights on.

Of course, you don’t tell the virgin that you are going to sacrifice her as you lead her up the mountain and it could all come down to circumstance. One thing is for sure, the last thing anyone wants to be is last in the queue when this thing goes the other way. What to do when faced with an impossible choice, to which no one knows the answer? We could consider going half pregnant and locking in some profits. Selling a bit in September, is always good to remember.


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